World stocks shake off tepid US economic news

[May 27, 2011]  BANGKOK (AP) -- Strong earnings on Wall Street overshadowed new signs of weakness in the U.S. economy, helping to spur world stock markets higher Friday.

Oil prices crept up to nearly $101 a barrel, while the dollar slipped against the yen and the euro amid signs of fatigue in the world's No. 1 economy.

European shares posted solid gains in early trading. Britain's FTSE 100 was 1.1 percent higher at 5,945.13. Germany's DAX rose 0.6 percent to 7,158.56 and France's CAC-40 jumped 1.2 percent to 3,965.55. Wall Street was headed for a muted opening, with Dow futures flat at 12,408 and S&P 500 futures slightly higher at 1,327.30.

Japan's Nikkei 225 index drifted upward and downward before finally settling in the red, down 0.4 percent to close at 9,521.94. Hurt by a strengthening yen, export shares fell. Canon Inc. and Sharp. Corp. both lost 0.4 percent. Panasonic Corp. was down 0.1 percent.

Sony Corp. plunged 3.2 percent, a day after reporting a 259.6 billion yen ($3.2 billion) loss for the fiscal year ended March 2011 and its third straight year of losses. Costs of online security breaches around the world and the March 11 earthquake in northeastern Japan battered the electronics and entertainment giant.

But most other major Asian benchmarks rose. Hong Kong's Hang Seng gained 1 percent to 23,118.07. Hong Kong-listed Lenovo Group Ltd. bounced 5.3 percent higher, a day after the fourth-largest personal computer maker said its fiscal 2010 profit more than doubled. South Korea's Kospi finished 0.4 percent higher at 2,100.24.

Australia's S&P/ASX 200 added 0.5 percent to 4,684, with energy and raw materials companies posting some of the index's bigger gains. Energy Resources of Australia Ltd. soared 5.2 percent. BHP Billiton Ltd., the world's biggest mining company, rose 0.5 percent. Bargain-hunting for other blue chip shares helped push retailer Woolworths Ltd. 0.5 percent higher.

Concerns about the European debt crisis have caused markets to wobble in recent weeks as the likelihood seemed to increase that Greece would need to renegotiate its debts, even after receiving a package of emergency loans last year.

Fears over the solvency of Greece heightened last week, when the Fitch ratings agency downgraded Greece's debt further into junk status and Standard & Poor's said Italy was in danger of having its debt rating lowered if it could not reduce its borrowing and improve economic growth.

But the market showed less volatility Friday, when the bad news started to fade and stocks regained some of their sparkle.

"The market had been worrying about the euro crisis, but it was nothing. The situation has been that bad for a very long time," said Jackson Wong, vice president at Tanrich Securities in Hong Kong. "We were just reacting to the downgrades from S&P and Fitch."

Wong said buying was largely driven by bargain hunting and short-position covering.

Mainland Chinese shares sank to their lowest level in nearly eight months as investors, succumbing to gloom over the outlook for the latter half of the year, unloaded shares.

The benchmark Shanghai Composite Index lost 1 percent to 2,709.95, its lowest close since Sept. 30 of last year. The Shenzhen Composite Index fell 2 percent to 1,101.11. Shares in coal companies advanced while agricultural-related and textile shares fell sharply.

"The losses today look more like panic selling. Investors are worried that companies' earnings might reach a turning point come this June," said Peng Yunlang, an analyst based in Shanghai.

On Wall Street, strong earnings helped push stocks higher Thursday, despite two reports suggesting the U.S. economic recovery is slowing. Tiffany & Co. rose 8 percent after the company said its income rose 25 percent on higher revenue across all regions.

But the Commerce Department reported the economy grew at a tepid annual rate of 1.8 percent in the first quarter, lower than many economists expected. Higher prices for gasoline and weak consumer spending have held back the economy. The Labor Department also said more people applied for unemployment benefits last week.

The Dow Jones industrial average rose 8.10 points to close at 12,402.76. It was the second day of gains for the Dow after three days of losses driven by concerns over Greece. The Standard & Poor's 500 index rose 5.22 points to 1,325.69. The Nasdaq composite rose 21.54 to 2,782.92.

Benchmark oil for July delivery was up 58 cents to $100.81 per barrel on the New York Mercantile Exchange. The contract settled at $100.23 on the Nymex on Thursday.

The euro strengthened to $1.4207 from $1.4140 in late trading Thursday in New York. The dollar slipped to 81.02 yen from 81.30 yen.

[Associated Press; By PAMELA SAMPSON]

AP researcher Fu Ting contributed from Shanghai.

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